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The
Commodity Futures Trading Commission requires futures traders
to identify whether they have an underlying business interest
(commercials) or if they don't (non-commercials).
Commercial positions are thought to be banks or businesses
hedging. Non-commercials accounts are understood as a proxy
for speculators.

Market participants tend to focus what non-commercial account are
doing as this is seen to be discretionary and the positioning
containing information about expected direction. The report
is generally reported on Friday afternoons and it cover the
period through the previous Tuesday.
Here are seven take-aways from the most recent report that
covered the week through January 17th.

1. The net (long-short positions) non-commercial
(speculative) euro positions was a record short
at 160k contracts. It was the fourth consecutive week that
the net short speculative position increased. However, the
subsequent price action, including the euro moving above its
20-day moving average in the sport market for the first time
since late October suggests that the streak ended.

2. Speculators have been long yen for more
seven months. Although the long position was trimmed a
touch (58.9k contracts from 59.7k), it is the third week the net
speculative position has been above 50k, which is the first time
since March 2008 of such a streak.

3. The net speculative sterling position,
short 41.6k contracts, would seem to cast doubt on the extent
that sterling is seen as a safe haven. Only briefly since
last May has the net speculative position been long sterling.
It has been short now since September and the net short
position in the largest since the first half of December.

4. The net speculative Canadian dollar
position is as short as it has been since April 2007. The
28.7k contracts short as of January 17th is only about 100
contracts more than the previous week. This may be a bit
surprising in the sense that the Canadian dollar is thought to
benefit from the relative strength of the US economy, especially
the manufacturing sector, healthy start of the year for equities,
and rise in oil prices.

5. The net long speculative Australian dollar
position rose for the fourth consecutive week. At
54.3k it is the largest net long position since June. While
the Canadian dollar is net-net little changed since January 17th,
the Australian dollar is a cent stronger. It should not be
surprising to see the net long position increase in next week's
report. That said, some of the positions may have been in a
cross against the euro, making the recovery of the euro,
potentially of greater influence.

6. The speculative market continues to reduce a large net
short Mexican peso position. In the week
through January 17th, the net short position was trimmed from
22.3k to 17.3k, which is the smallest net short position since
mid-November. Since January 17th the peso has been among
the strong currencies in the spot market. It has gained
about 1.95% against the dollar. The Swedish krona is the
only G10 currency to outperform it since January 17th.
Among emerging market currencies, only the currencies of
Hungary, Czech and Poland (lifted in part by the euro's recovery)
did better than the peso during the second half of last week.
The continued rise in the peso suggest the net speculative
position may be on the verge of shifting.

7. Lastly, and perhaps most importantly, remember for every
futures contract there is a buyer and seller. If the
non-commercials are net short, that means that the
commercials are net long (barring the unreported
contracts). For example, while the net speculative position
at the IMM is short euros, the net commercial position is net
long euros. As of January 17th, the net commercial
position was long 180k contracts. Assuming that the
commercials are largely banks (futures contracts, which in effect
are standardized forward contracts, tend not to be ideal for
corporations trying to get favorable accounting treatment of
their hedge, for example), then it would appear that they (the
banks) are absorbing the euros that the speculators are selling.
This dovetails with the recent flow of funds report
suggesting US banks have increased their euro exposure.